Moody's Upgrades Hypo-Bank Burgenland's Ratings, Affirms Deposit Ratings and Counterparty Risk

Moody's Investors Service has upgraded Hypo-Bank Burgenland AG's (Bank Burgenland) long-term issuer ratings to A2 from A3 and its short-term issuer ratings to P-1 from P-2. The affirmation of the bank's A2/P-1 long- and short-term deposit ratings and its A1/P-1 long- and short-term Counterparty Risk Ratings (CRR) reflects the bank's strong capitalisation, solid profitability, and stable funding and liquidity profile. The outlook on the long-term deposit ratings remains stable, while the outlook on the long-term issuer ratings was changed to stable from positive.

Key Takeaways:

• Bank Burgenland's baa1 Baseline Credit Assessment (BCA) reflects the bank's very strong capitalisation, solid profitability, and stable funding and liquidity profile, effectively mitigating asset risks and market and operational risks.
• The upgrade of the long-term issuer ratings reflects the reduced loss severity due to higher outstanding volumes of senior unsecured debt instruments, resulting in two notches of rating uplift from our Advanced LGF analysis.
• The affirmation of the bank's long-term deposit ratings incorporates the affirmation of the baa1 BCA and the results from our Advanced Loss Given Failure (LGF) analysis.
• The stable outlook on Bank Burgenland's long-term deposit and issuer ratings reflects our expectation of an unchanged financial profile, with profitability levels providing a sufficient cushion to absorb an elevated level of risk costs.
• The bank's small market share in the domestic banking system and constraints under the Bank Recovery and Resolution Directive (BRRD) on governments to provide support to ailing banks result in no rating uplift.
• Factors that could lead to an upgrade or downgrade of the ratings include the bank sustainably strengthening its solvency profile and reducing problem loans and concentration risks, or a significant decrease in the volume of senior unsecured liabilities relative to its tangible assets.

Statistics:

• Bank Burgenland's long-term issuer ratings were upgraded from A3 to A2.
• The bank's short-term issuer ratings were upgraded from P-2 to P-1.
• The bank's long-term deposit ratings remain A2/P-1, with a stable outlook.
• The bank's Counterparty Risk Ratings (CRR) remain A1/P-1, with a stable outlook.

Sources:

• Moody's Ratings. "Moody's upgrades Hypo-Bank Burgenland's ratings, affirms deposit ratings and CRR." 2023 (Exact source date not provided, but mentioned as the latest news release)
• Moody's. "Banks Methodology." November 2024. Available at https://ratings.moodys.com/rmc-documents/432741
• Moody's. "Rating Methodologies." Available at https://ratings.moodys.com